Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

NOTE 13. Income Taxes

Consolidated income (loss) from continuing operations before taxes consists of the following:

(in millions)	2011			2010			2009
U.S.	($	22.4	)	($	73.6	)	($	61.0	)
Foreign		(49.8	)		(1.6	)		(41.4	)
	($	72.2	)	($	75.2	)	($	102.4	)

Provision for (benefit from) income taxes from continuing operations consists of the following:

(in millions)	2011			2010			2009
Current:
U.S. federal	($	1.2	)	($	1.2	)	($	0.8	)
State and local		0.1			0.1			(0.1	)
Foreign income and withholding taxes		0.1			(0.3	)		0.6
	($	1.0	)	($	1.4	)	($	0.3	)

Deferred:
U.S. federal		—			(15.1	)		(1.8	)
State and local		—			—			(1.7	)
Foreign		0.1			(0.1	)		(6.8	)
		0.1			(15.2	)		(10.3	)
Benefit from income taxes from continuing operations	($	0.9	)	($	16.6	)	($	10.6	)

A reconciliation between the actual income tax expense (benefit) provided and the income tax expense (benefit) computed by applying the statutory federal income tax rate of 35% to income before tax is as follows:

(in millions)	2011			2010			2009
Income taxes (benefit) at U.S. statutory rate	($	25.3	)	($	27.5	)	($	35.8	)
State and local income taxes		0.1			0.1			(1.7	)
Foreign tax rate differential		0.4			(0.1	)		(0.1	)
Valuation allowance		25.7			9.9			27.8
Nondeductible excise tax		—			3.9			—
Tax loss carry back		(1.7	)		(1.2	)		(2.5	)
Other		(0.1	)		(1.7	)		1.7
	($	0.9	)	($	16.6	)	($	10.6	)

Deferred income taxes reflect the effect of temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements. Provisions are also made for estimated taxes which may be incurred on the remittance of subsidiaries’ undistributed earnings, none of which are deemed to be permanently reinvested.

Significant components of our deferred tax assets and liabilities as of December 31 were as follows:

(in millions)	2011			2010
Deferred tax assets:
Other postretirement liabilities	$	26.6		$	29.5
Product warranty and self-insured risks		2.8			5.0
Tax Carryforwards		393.6			379.5
Other accruals and miscellaneous		14.1			7.8
		437.1			421.8
Valuation allowance		(395.8	)		(380.1	)
Total deferred tax assets	$	41.3		$	41.7
Deferred tax liabilities:
Property, Plant & Equipment	$	21.0		$	23.4
Pension		15.5			8.6
Unremitted foreign earnings		—			—
Unrealized gains on securities		3.4			4.4
Other		1.3			5.1
Total deferred tax liabilities		41.2			41.5
Net deferred tax (liabilities) assets	$	0.1		$	0.2
Deferred tax detail is included in the consolidated balance sheet as follows:
Tax assets	$	0.1		$	3.9
Non-current deferred tax liabilities		—		$	3.7
Total	$	0.1		$	0.2

At December 31, 2011, we had the following tax carryforwards:

	Amounts		Expiration
U.S. Federal Net Operating Loss	$	194.4	2028 to 2031
U.S Federal Capital Loss		68.6	2012
U.S. State Net Operating Loss		17.6	2016 to 2030
Foreign Net Operating Losses		65.0	Unlimited
U.S. Tax Credits		47.7	2012 to 2030
U.S. Alternative Minimum Tax Credit		0.3	Unlimited
Total operating loss and tax credit carryforwards	$	393.6

Income taxes are allocated between continuing operations, discontinued operations and other comprehensive income because all items, including discontinued operations, should be considered for purposes of determining the amount of tax benefit that results from a loss from continuing operations and that could be allocated to continuing operations. We apply this concept by tax jurisdiction, and in periods in which there is a pre-tax loss from continuing operations and pre-tax income in another category, such as discontinued operations or other comprehensive income, the tax benefit allocated to continuing operations is determined by taking into account the pre-tax income of other categories.

The receipt of $54.5 million in gross proceeds from the reversion of the hourly retirement plan in 2010 generated a tax gain that was fully offset for federal tax purposes by our NOL carryforwards.

Deferred income tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. All available evidence, both positive and negative using a more likely than not standard, is considered to determine if valuation allowances should be established against deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, previous experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2011. This objective negative evidence limits the ability to consider other subjective evidence such as our projections for future growth.

Based on this assessment, valuation allowances have been recorded against our U.S. net deferred tax assets and certain international net deferred tax assets, specifically Brazil, France and India, Canada & China, where we believe it is not more likely than not the deferred taxes will be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

At December 31, 2011 and 2010, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were $5.5 million and $5.5 million, respectively.

We accrue interest and penalties related to unrecognized tax benefits in its provision for income taxes. At December 31, 2011 and 2010, we had no accrued interest and penalties.

The following reconciliation illustrates the unrecognized tax benefits for the years ended December 31:

(in millions)	2011		2010
Unrecognized tax benefits – beginning of period	$	5.5	$	5.9
Payments		—		—
Decreases		—		(0.4	)
Additions		—		—
Unrecognized tax benefits – end of period	$	5.5	$	5.5

We have recorded unrecognized tax benefits for uncertain tax positions reported on returns that are currently being examined by the tax authorities. We expect that the tax authorities will complete their review of these positions during calendar year 2012; therefore, the amount of the unrecognized tax benefit could be reduced by $5.5 million within the next 12 months.

We file U.S., state and foreign income tax returns in jurisdictions with varying statues of limitations. We have open tax years from 2005 to 2010, with various significant taxing jurisdictions including the U.S., Canada, France and Brazil. In the U.S., our federal income tax returns through 2005 have been examined by the Internal Revenue Service.